Sunday, September 8, 2013

I am in the nice position as a third time founder that I no longer have to look at the world as a zero sum game. My success and those of other entrepreneurs in learning technology are correlated in my opinion, not inversely correlated as I remember feeling in my first company. So one of the things I try to do is spend time with other entrepreneurs, especially first-time entrepreneurs with good ideas. It was startling to me at netgravity how many truly awful decisions I made as I was learning to run a company, and how much pain and anguish they caused. A good example of this is that I had brought on two venture capitalists who were both from the client-server world when netg was a client-server company (ie people installed our software on their site instead of paying for it as a service and letting us manage it). When I saw the first saas companies, double click and ad force, it was obvious to me that the business model would work better and the customer experience would be better if we managed the infrastructure. I then went through almost 2 years arguing with my board over this and putting together several ill-fated strategies for becoming a saas company. Because of course my vcs preferred the place they had always made money, client server, and they didnt want netg to be a saas company. Ultimately I created a skunkworks to build our service which became a much bigger and higher growth revenue stream for us than the client server business and of course my board loved it then. But those two years sucked because my inability to get us into saas quickly dragged my team into all kinds of time wasters and probably cost us several billion in market cap.

So fast forward to today in learning technology. Its a traditionally horrible market that is about to become ridiculously good, but only if you respect the drivers that made it suck and the ones that make it beautiful. The thing that has made learning tech suck for 30 years is that schools are exceptionally bad at buying things. You can read other of my blog posts for the details, but anyone who has run these companies or served on boards can tell you the ways it sucks for as long as you would like to listen. The thing that has changed is that students now have access to learning through their phones and other devices. So you don't need to sell things to schools. We even have examples of companies like edmodo and class dojo in our space who figured this out and are crushing it.

So why is it that almost every entrepreneur I speak with wants to sell to schools? They all have their key insights on why their sales strategy will work 10x better than anyone's before. And of course one things startups do well is to explore a huge number of approaches to a well understood problem. So these companies fail, usually slowly and painfully as investors learn that in fact the buyer hasn't changed, their incentives haven't changed, and the startups outcomes dont change.

My only conclusion is that entrepreneurs, especially first time ones, are problem seeking and solving machines and the structural concern about whether the customer has any money is secondary. Not only that, but because most entrepreneurs in this space have absorbed its culture, the idea that your buyer is the parent and not the school is very close to heresy. I can't tell you the number of very smart people I speak with who cannot accept that schools are not the one and only vehicle to improving academic outcomes. So the idea of engaging parents seems like it misses the point. I think both of these biases far outweigh the actual reason most entrepreneurs give for selling to schools, which is that they don't know what parents will pay for. This last one really doesn't take much imagination or creativity to figure out, so my conclusion is that people have actually never spent any time thinking about it, because of the blinders created by one and two. I hope for the sake of the kids that we see more entrepreneurs break out of this mental prison.